I remember college. It was a time in my life where I had no clue what I wanted to do when I “grew up,” and it was simply scary. I had student loan debt, no emergency fund, and felt like I didn’t have a firm foundation to launch from into the real world. If I had only known these three things before attending school, I would have been in a much better position!
Perhaps you’re like I was. You’re in school but you don’t know what job you truly want to land, and you’re accruing debt up to your eyeballs. I suggest to those of you who are living on your own (or even living with your parents still) to step back away from college and accomplish these three goals before you continue your education.
This isn’t for everyone. It’s certainly not for the faint of heart. But I can assure you that if you accomplish these three goals before attending college, you’ll have less stress and a stronger ability to focus on your schoolwork.
1. Shield yourself from the storm (fully fund your emergency fund)!
Having an emergency fund while in college is so very important. The last thing you want to do in college is have to decide whether to pay for your broken transmission or buy your textbooks.
So how much money do you need in your fund? I tend to agree with Dave Ramsey when he says to have 3 to 6 months worth of expenses in an emergency account.
2. Erase the red ink (pay off all your non-mortgage debt)!
Alright, this is going to be a hard one for many of you to swallow. I believe with all my heart that going to college while in debt puts you at a severe disadvantage. Let’s take a look at two types of debt you shouldn’t have while in college:
- Non-mortgage debt you have to pay for while in college. This could include car loans, former student loans, personal loans, business loans, etc. Having to pay for this debt while you’re going to school makes it very difficult to cash flow college (which we’ll get to in a minute).
- Non-mortgage debt that is deferred until after graduation. Typically, student loan payments are deferred until after you graduate. I believe this puts you at a severe disadvantage because when you graduate, you’ll be more likely to take whatever job you can get your hands on because you desperately need the money. Not having to pay for student loans after college opens up your opportunities and allows you to say “No” to those jobs with minimal pay.
3. Create and implement a master plan (cash flow college)!
“Whoa, whoa, whoa. Wait a minute John. Are you saying that people shouldn’t take out student loans and instead pay for college with cash?”
Yep, that’s what I’m saying. Here’s why:
I’ve watched too many of my friends struggle with student loan payments after college. Either they don’t land the dream job they thought they were going to get, or they have no interest in what they originally attended college for in the first place and decide to pursue other ambitions.
This is why I advocate creating a master plan. My wife is currently going back to college and we had to come up with a formula to determine how much money we needed to save up before she goes to college.
In general, you’ll need to consider two things:
- How much income are you going to lose when you or your spouse goes back to college? Let’s pretend that amount is $40,000.
- How much money will you have to spend on college as you’re going to college? Let’s pretend that amount is $20,000.
- How much of this amount can I cash flow with my remaining income over the course of college?
- Can I cut my expenses to help cash flow part of this money?
- Can I work a different job while in college to cover part of these expenses?
- Should I put on hold my 401k or other retirement plans in order to accomplish these short term goals?
What’s Your Story?
This was a risky article. I know it’s almost heresy in today’s culture to mention college without student loans. But I want to hear from those of you who have cash-flowed college. We’re currently doing it, and making heavy sacrifices to do so.
Meet us in the comments, and let’s discuss some ways that you have payed for college with cash. Or, maybe you have questions for the rest of the ChristianPF community on your particular situation. Let’s talk about it. I can’t wait!